$2 Million California Labor Lawsuit Settlement with Costco Nearing Preliminary Approval

San Diego, CAA proposed California labor law class action will have to wait a little while yet before the rubber stamp comes down to mark ‘settled’ following yet another refusal by a US District Court judge in California to approve a proposed settlement due to inconsistencies between governance in the claims, and the language contained therein.

The California labor lawsuit was filed by Douglas Thompson, the lead plaintiff in what was proposed as a class action against Costco Wholesale Corp. (Costco). Thompson is acting on behalf of 900 current, or former fleet drivers of Costco who made allegations of wage theft and other compensation claims under the California labor code. According to court documents, those allegations were amended during the course of negotiations to focus solely on a minimum wage claim under the Fair Labor Standards Act (FLSA), a federal statute.

A settlement worth $2 million was reached, with the defendant seeking to be released from future liability, including but not limited to the FLSA claims. However the judge, US District Judge Cathy Ann Bencivengo declined to approve the deal when she initially considered the settlement in February due to a lack of distinction between FLSA collective actions and Rule 23 class actions.

There is a difference, the judge said back in the winter – and she felt that parties “wholly ignored” those differences.

To wit, judgments in Rule 23 class actions bind all class members unless they opt out of the California labor lawsuit. By contrast, plaintiffs in FLSA collective actions must opt into the lawsuit in writing. Thus – unlike a class action – only plaintiffs who expressly join the collective action are bound by its results.

Judge Bencivengo noted the initial settlement lacked an appropriate opt-in procedure for the FLSA collective, requiring Rule 23 class members to release FLSA claims, in exchange for nothing simply to participate in the settlement of the Rule 23 class claims.

The parties went back and amended the language in their settlement agreement. However, on April 26 the judge turned it down yet again. While the parties had correctly established a separate fund within the settlement for the FLSA collective, together with revising the opt-in procedure, Judge Bencivengo nonetheless found the release language in the amended settlement document remained less-than-adequate and still needed work.

“These deficiencies further underscore the difficulty (if not impossibility) of maintaining a Rule 23 class action and an FLSA collective action in the same lawsuit,” Judge Bencivengo said. “Ultimately, however, any effort to settle the claims of a Rule 23 class as well as FLSA claims in a collective manner using only one settlement agreement must account for these differences.”

While going into fair detail as to what the remaining deficiencies are, Judge Bencivengo offered an express solution in order to reign in the language in the settlement agreement, allowing the two parties to move forward. The easiest way in which to correct the continuing deficiencies in the California labor employment law action, she said, might be to “include an express statement in the release that notwithstanding any other terms in the agreement, participating class members who do not opt-in to the FLSA collective do not release any FLSA claims against Costco.”

She gave them a deadline of May 10 to get it done, and submit a fresh motion for preliminary approval of the California labor law settlement. After which, the settlement would be in the pipeline for final approval.

The case is Douglas Thompson et al. v. Costco Wholesale Corp., Case No. 14-cv-2778, in the US District Court for the Southern District of California.